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New York, D.C. and Title II

I can see the headlines now: “ISPs tell Wall Street and Washington mostly, but not quite exactly, the same thing about Title II.” Doesn’t quite have the right ring to it…

Instead, Brian Fung at the Washington Post has been reporting a number of stories attempting to show that network operators are telling Wall Street and Washington two entirely different stories and musing on some potential policy implications of such possible discrepancies.

Yesterday afternoon, Bob Quinn with AT&T expressed his surprise at the line of stories. I must say I agree with Mr. Quinn – Fung is really stretching his interpretations. Here I suggest we go to the primary sources: The transcripts of interviews with executives from Comcast and Time Warner Cable that Mr. Quinn reproduces are quite up-front with their thinking on Title II. They clearly state that the Title II framework is bad policy and bad for investment. Nobody in D.C. has claimed that the world will melt under Title II. But, let’s be clear, to the extent any of these statements can be read to say carriers can live under Title II with forbearance done properly (a big qualifier) does not make Title II good policy.

There are two key reasons that Title II is not good for investment – and neither of them have much of anything to do with net neutrality. First, Title II introduces considerable uncertainty around what rules would govern IP networks with a number of possible unintended consequences. A second, related concern is that Title II opens the door to a highly regulatory process that could potentially lead to things like rate regulation, interconnection tariffing, or network unbundling.

This is the most dangerous slip in net neutrality reporting – the conflation between “strong” net neutrality rules and Title II itself. As we at ITIF have explained, so much of the push for Title II has been about issues far beyond net neutrality. This is why there is so much more of a swirl in D.C. than in New York – policy folks here recognize that this is not a fight over net neutrality, but a broader push for all sorts of common carrier type regulations. New York has the pleasure of dealing in realistic possibilities, not explaining why totally unwarranted policy is totally unwarranted.

It is important to consider the differences in timeframe these two communities operate in. Investors are much more concerned with the short term, looking quarter-to-quarter, whereas the policy debate is taking a much longer view at the proper regulatory framework for broadband. Indeed, these questions are being asked in the context of AT&T deciding to pause consideration of further investments (beyond their commitments for the pending DirecTV merger and current GigaPower plans). The fact that questioning whether the D.C. conversation itself is grounds for delaying investment says a lot.

I personally am still unconvinced that the case has been made that Title II is necessary to have effective rules to promote the open Internet, though it increasingly looks like that horse has left the barn. But even if you believe the Comcast-Cellco-Verizon line of cases limiting common carrier rules under Title I warrant a different approach, why would we turn to Title II with all its warts. Title II, beyond being a simply outdated framework for regulation, has the potential for numerous unintended consequences. For example, potential international implications (a la sending-party-pays regulations under the ITU) is one of many possible problems with classifying broadband as a telecommunications service. If we have really given up on section 706, I think it’s better to start talking about congressional action that clears up jurisdiction for the widely agreed-upon net neutrality principles, without the unrelated problems of Title II.

I don’t mean to pick on Mr. Fung. I certainly don’t envy journalists covering these issues. Trying to make complex tech policy digestible is not an easy job. Errors are certainly forgivable if not expected. But this line of stories really stretches any interpretation of the statements made. If we are going to simply cherry-pick quotations out of context, see the below for what I think is a more accurate excerpt. How we get from reclassification is “highly likely to. . . disincentivize investment” and “I don’t think [Title II] is great for our investor group” to a headline of “Comcast, Charter and Time Warner Cable all say Obama’s net neutrality plan shouldn’t worry investors” is beyond me.

And obviously the president has advocated a reclassification of broadband. . . . We think that that is a — that would be a mistake. We think that it’s highly likely to cause all sorts of unintended consequences, create uncertainty, disincentivize investment, and probably at the end of the day end up costing customers more for lesser services. – Rob Marcus, Time Warner Cable

Title II is a 1934 style regulation and we think it’s inappropriate and probably harmful to take a 1934 style of regulation and apply it in 2014 or 2015 to the Internet…. So it’s still quite messy and I don’t think it’s great for our investor group or how people are thinking about investing. . . . Title II unfortunately is just a negative. – Michael Agelakis, Comcast

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